German Unemployment Rose for Fourth Month in July on Crisis

Photographer: Michael Nagle/Bloomberg

Pedestrians pass an employment office in Munich. Close

Pedestrians pass an employment office in Munich.

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Photographer: Michael Nagle/Bloomberg

Pedestrians pass an employment office in Munich.

German unemployment climbed for a fourth straight month in July as the sovereign debt crisis prompted companies to delay hiring.

The number of people out of work rose a seasonally adjusted 7,000 to 2.89 million, the Federal Labor Agency in Nuremberg said today. That’s in line with the median forecast of 31 economists in a Bloomberg News survey. The adjusted jobless rate held at 6.8 percent.

German business confidence fell to a two-year low in July as market turmoil and recessions in euro-area neighbors damped the outlook for economic growth and corporate earnings. The unemployment rate is still at its lowest level in two decades and wages are rising, supporting consumer spending in Europe’s largest economy.

“To some extent the labor market has been Germany’s active immunization against the ongoing euro-zone crisis,” said Carsten Brzeski, senior economist at ING Belgium SA in Brussels. “However, signs that this immunization is fading away are hard to miss. Employers have continuously downscaled their recruitment plans and employment expectations in the manufacturing industry have dropped.”

Until April, German unemployment had sustained an almost uninterrupted decline for more than two and a half years. The Federal Labor Agency said in a press release today that seasonal factors including school leavers temporarily registering as unemployed typically influence the July figures.

Economic Growth

While latest data suggest economic growth is slowing, the Bundesbank in June predicted expansion of 1 percent this year. By contrast, the European Commission forecasts a 0.3 percent contraction for the 17-nation euro economy as a whole.

Moody’s Investors Service on July 23 lowered the outlook on Germany’s Aaa credit rating to negative, citing the risk that Greece could leave the euro and an “increasing likelihood” that countries such as Spain and Italy will require support. Purchasing managers’ surveys show Germany’s manufacturing and service industries are contracting.

ThyssenKrupp Steel Europe AG, Germany’s biggest steelmaker, said on July 26 that it will introduce shortened shifts for workers from August due to “ongoing weak orders,” at least until the end of the year.

Job Cuts

Munich Re, the world’s biggest reinsurer, will cut as many as 1,350 jobs in Germany this year at its Ergo insurance unit to reduce costs, the company said on July 27. Western European financial firms have announced almost 24,000 job losses this year, data compiled by Bloomberg show.

The Munich-based Ifo institute’s July business climate index, based on a survey of 7,000 executives, fell to the lowest since March 2010 last week. The ZEW Center for European Economic Research in Mannheim said on July 17 that its index of investor and analyst expectations fell for a third straight month.

“The uncertainty in the euro area will pass through into German growth expectations quite clearly in the second half of this year,” said Lothar Hessler , an economist at HSBC Trinkaus & Burkhardt AG (TUB) in Dusseldorf. “The outlook for the euro area has significantly worsened.”

Germany’s jobless rate was 5.6 percent in May, according to the latest harmonized Organization for Economic Cooperation and Development figures. That compared with 8.2 percent in the U.S., 10.1 percent in France and Italy and a euro-area average of 11.1 percent.

To contact the reporters on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net; Brian Parkin in Nuremburg at bparkin@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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